Tuesday, June 10, 2008

The Business of Baseball: In Praise of Peter Angelos?

Not quite, but let's at least give credit where credit is due
by Matthew Taylor

Regionalism. For years now it has been a dirty word in Baltimore, understood by locals to represent an effort to drain the Orioles' organization of its local identity. Regionalism meant business suits and cell phones in Camden Yards; it referred to the absence of the city's name on the team's road jerseys.

Now that D.C. has its own new stadium and team, and Oriole players will soon sport "Baltimore" across their chests whenever they leave the friendly confines, even die-hard Bird watchers should be willing to consider the bigger picture.

The time has come to redefine the word regionalism in our local vocabulary and give it a more positive meaning. Because for as much as Adam Jones, young arms, and 5-for-1 player deals are central to the O's future on-field success, regional appeal - fostered through broadcast rights - is ultimately what will fuel the organization's financial solvency and success.

With this in mind, Oriole fans should have a keen interest in Monday's ruling by a federal arbitrator that Time Warner Cable must carry MASN in North Carolina, a decision that serves as another indicator of the revival of this proud franchise. Tim Lemke of The Washington Times provides a brief overview of the ruling's significance.

First, an arbitrator in North Carolina has ordered Time Warner Cable to carry the Mid-Atlantic Sports Network, allowing more than 1 million cable subscribers to begin getting Nationals and Orioles games. The ruling essentially expands MASN's coverage area to nearly all of North Carolina all the way up to parts of Pennsylvania.

The Birds' regional appeal has typically been measured in strict relation to the D.C. and Northern Virginia markets. However, North Carolina and Pennsylvania are in fact two key target markets that have been getting, and will continue to get, marketing attention from the O's.

Take, for example, the presence of Oriole promotions and personalities at Durham Bulls games, including last summer's MASN-sponsored visit by Rick Dempsey to Durham Bulls Athletic Park. Roar from 34 noted at the time: "It's a shrewd move by MASN to strengthen its ties to the North Carolina market. The Birds were the nearest Major League Baseball team until the Nats started playing ball in D.C., and O's games are regularly televised in the state."

Sure, fans from these areas could just as easily gravitate toward the Nationals given that MASN broadcasts both teams' games. Either way the Orioles will benefit. Remember that sweetheart of a deal Peter Angelos got from MLB when the Expos relocated to D.C.? The Orioles currently have a 90 percent stake in MASN, a share that will reportedly decline to a still favorable 67 percent over the next 23 years.

The bottom line is eyeballs, a million or more pairs of which could in theory be trained on MASN should the network continue to hold serve in its battle with Time Warner, thus creating a strong regional sports network (RSN) for the Birds. Keeping up with the big boys of the AL East, those Evil Empires to the north, will forever require the type of financial backing that a strong network can provide.

Consider the insight on RSNs offered by Kurt Badenhausen, a senior editor at Forbes, during a Q&A with the excellent blog "The Biz of Baseball."

Bizball:RSNs have become an incredibly important part of the revenue streams for many clubs. How big of a factor are they, and do they create a have and have-not environment for those clubs that are in markets where they are unable to take full or partial ownership of one?

Badenhausen:We don’t include the value of RSNs in our calculations of team values. From a revenue standpoint, we only include the rights fee that the RSN pays the baseball team. These are supposed to be arms-length transactions to adhere with MLB’s revenue sharing regulations. But there is no doubt that the Yankees and Red Sox are getting below-market rights fees from their RSNs. While we don’t include RSNs in the value of teams, they are an important factor driving the business of the teams that have them. The Yankees and Red Sox collect stars to help fuel ratings on YES and NESN respectively. Both RSNs are extremely profitable allowing the teams to dole out high salaries and potentially lose money on the team itself, while making it up with RSN profits.

Earlier this season, in an article titled "The failure dynasties," ESPN's Jonah Keri snarkily stated, "Every player, manager, GM and hot dog vendor who failed to do the job in the past 10 years is an extension of Angelos' reign of error." Keri accurately identified Angelos as the fans' favorite whipping boy.

By contrast, this is one case that calls for a begrudging acknowledgment of, and a tip of the cap to, the owner's business acumen.